Warning that licensees face breach-reporting overload
Financial planning licensees face finding themselves swamped by increased breach reporting requirements under legislative changes being pursued by the Federal Government.
The increased breach reporting obligations will flow from legislative changes which elevate the status of single breaches and extend what represents a reportable breach.
This represents a significant departure from current practice where licensees would need to have detected a number of shortcomings during an adviser audit before concluding that a significant breach had occurred worthy of reporting to the Australian Securities and Investments Commission (ASIC).
Association of Financial Advisers (AFA) general manager, Policy and Professionalism, Phil Anderson said he was significantly concerned about the implications of the changes within the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 which he believed would result in a significant increase in reportable breaches.
He said that primary was the level of work that the current arrangements would inflict on licensees in the absence of the Government providing a meaningful regulatory approach.
“This represents a challenge for licensees but a boon for lawyers and compliance consultants,” Anderson said.
“At present, the conventional approach to significant breach reporting for financial advice is that an issue would need to be evident in multiple cases before it was reported to ASIC,” he said. “So, for example, with advice that is assessed as having failed the best interests duty, there might need to be three or four cases as part of an adviser audit before it was assessed as a significant breach.”
“Where there are issues with fee disclosure statement (FDS) non-compliance, it would need to be more systemic before it was reported.”
However, Anderson said that under the legislation as it currently stands, it would be a matter of reporting any and every breach of the civil penalty provisions.
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